HQ 0733352 - Country of origin marking of industrial pressure gauges. IA MAR-2:K:C:A AG; Substantial transformation; ultimate purchaser; 19 U.S.C. 1304; 19 CFR 134.1(d); 19 CFR 134.1(d)(2); 19 CFR 134.32(d); 19 CFR 134.35; 19 CFR 134.41(a); Koru North America; Friedlaender & Co.; Gibson- Thomsen Co.; National Juice Products Association; Uniroyal; 727936 revoked; ORR 824-70; 728213; 724901; 733185; 732999; 733578; 733151; 732057; 732940; 728801 - United States International Trade Commision Rulings

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HQ 733352

May 3, 1991

MAR-2-05 CO:R:C:V 733352 EAB

CATEGORY: MARKING

John J. Martuge, Area Director
U.S. Customs
J.F.K. Airport Area
Building 178
Jamaica, NY 11430

RE: Country of origin marking of industrial pressure gauges. IA MAR-2:K:C:A AG; Substantial transformation; ultimate purchaser; 19 U.S.C. 1304; 19 CFR 134.1(d); 19 CFR 134.1(d)(2); 19 CFR 134.32(d); 19 CFR 134.35; 19 CFR 134.41(a); Koru North America; Friedlaender & Co.; Gibson- Thomsen Co.; National Juice Products Association; Uniroyal; 727936 revoked; ORR 824-70; 728213; 724901; 733185; 732999; 733578; 733151; 732057; 732940; 728801

Dear Mr. Martuge:

This is in response to your memorandum dated May 2, 1990, requesting internal advice concerning the country of origin marking of pressure gauges imported for use in various industrial applications or sold to independent "jobbers", as more fully set forth hereinafter. Of course, we have discussed the issue at length with the District Director, Cleveland, the National Import Specialist, New York, and import specialists in Cleveland and New York and we regret the delay in responding in writing.

FACTS:

Pressure gauges are imported either to be used in the manufacture of commercial dishwashers, drilling equipment or refrigeration equipment, or to be sold to independent contractors and plumbers to be used by them in the repair of the foregoing or similar equipment. The gauges may be either stem- or panel- mounted as an integral and permanent part of the particular equipment. Stem-mounted gauges are fully visible after they have been assembled into the particular machinery by way of wrenching the threaded stem of the gauge into the receptacle for which it was designed. Panel-mounted gauges, by whatever method they are mounted, have only their face visible, as, for example, the speedometer in the dashboard of a car.

Two sets of samples representing two different importations have been submitted. In both sets, the foreign origin of the particular gauges appears die-stamped, etched or cut into the metal nut locking the gauge onto the threaded stem. On some samples, the country of origin marking appears on the back of the nut; in others, on the front. In no case is the country of origin indicated on the face of the dial of any gauge.

For purposes of this ruling, we will presume that the gauges that are to be sold to original equipment manufacturers are assembled into domestic commercial dishwashers, drilling equipment or refrigeration equipment.

ISSUE:

Whether imported pressure gauges must be marked with the country of origin on the face of the dial.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The Court of Interna- tional Trade stated in Koru North America v. United States, 701 F.Supp. 229 (1988): "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved." The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 (1940) at 302: "Congress intended that the ultimate purchaser should be able to know by an inspec- tion of the marking on the imported goods that country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the ultimate purchaser as "generally the last person in the U.S. who will receive the article in the form in which it was imported. If an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article." Pursuant to 19 CFR 134.35, if the manufacturer is the ultimate purchaser, the
imported article is excepted from individual marking provided the outermost container to reach the ultimate purchaser is marked to indicate the country of origin of the article.

A substantial transformation occurs when an article loses its separate identity and becomes a new article having a new name, character or use. United States v. Gibson-Thomsen Co., 27 CCPA 267 (1940); National Juice Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986); Koru North America v. United States, supra.

In HQ 732999 (January 25, 1990), Customs determined that a U.S. manufacturer who assembles imported automotive door hinge parts and then incorporates the finished hinges into a vehicle is the ultimate purchaser of the imported hinge parts. The articles were substantially transformed as a result of the combining operations in which they lost their separate identities; thus, the imported parts were excepted from individual country of origin marking, provided that Customs officials at the port of entry were satisfied that the articles would be used only in the manufacture of finished door hinges and vehicles, and not otherwise sold. In HQ 733578 (August 27, 1990), Customs found that imported electrical outlet boxes lost their separate identities when used in the manufacture of mobile homes and recreational vehicles; the manufacturer was the ultimate purchaser of the electrical outlet boxes, which were excepted from individual marking so long as Customs officials at the port of entry were satisfied that they would reach the manufacturer in their properly marked containers and not be re-sold.

Customs ruled in ORR 824-70 (August 24, 1970), that a manu- facturer who purchases imported golf club heads, either finished or unfinished, and assembles them with shafts and grips of U.S. origin into finished golf clubs, is the ultimate purchaser of the imported golf club heads. The ruling directed that if the Regional Commissioner of Customs was satisfied that the imported golf club heads were to be used by an original equipment manufac- turer, then the golf club heads were excepted from individual marking. Accord, HQ 728213 (July 3, 1985) and HQ 733151 (September 11, 1990). In HQ 724901 (April 9, 1984), Customs advised that the ultimate purchaser of imported golf club grips to be used in the manufacture of golf clubs was the golf club manufacturer. Customs stated that golf club grips which are imported by golf club manufacturers in the U.S. are substantially transformed into new and different articles of commerce, i.e., golf clubs.

In HQ 733185 (April 11, 1990) Customs reiterated the posi- tion that golf club grips imported by golf club manufacturers or intended to be sold to golf club manufacturers would be excepted from individual marking. However, Customs also found that
imported golf club grips that were to be used in the repair or replacement of grips on completed clubs that already had been purchased or received by the consumer must be individually marked. Customs reasoned that the mere fitting of a replacement grip onto a golf club shaft is a simple assembly not constituting a substantial transformation.

For purposes of determining the identity of the ultimate purchaser in the case of a manufacturing process which may be a mere combining operation under 19 CFR 134.1(d)(2) or a substantial transformation under 19 CFR 134.35, Customs has often looked at six factors:

1) whether the article is completely finished;

2) the extent of the manufacturing process of combining the article with its counterparts as compared with the manufac- turing of the subject article;

3) whether the article is permanently attached to its counterparts;

4) the overall importance of the article to the finished product;

5) whether the article is functionally necessary to the operation of the finished article, or whether it is an accessory which retains its independent function; and,

6) whether the article remains visible after the combining.

See HQ 732057 (April 16, 1990) and HQ 732940 (July 5, 1990). These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. See HQ 728801 (February 26, 1986) and HQ 732940, supra. Of course, where the imported article is the essence of the completed article, and the cost of and skill in manufacturing the foreign component are significantly greater than those of the domestic manufacturing or combining process which leaves the identity of the imported component intact, there is no substantial transformation of the imported article, and the domestic manufacturer is not the ultimate purchaser of the foreign goods, Uniroyal, Inc. v. United States, 3 CIT 220 (1982).

In HQ 727936 (January 27, 1986), Customs ruled that pressure gauges must be marked on the face of the dial, stating that "a pressure gauge is, itself, a separate entity which retains its distinct identity after its attachment to another article subsequent to importation." No specific import transactions were involved in the case. Referring to 19 CFR 134.1(d)(2), which provides that, if a manufacturing process is a minor one which
leaves the identity of the imported article intact, then the consumer or user of the article who obtains it after the processing will be the ultimate purchaser, Customs found that the ultimate purchaser of pressure gauges, "in most cases", will be the user of the gauges after they have been attached to an appliance, such as a gas boiler. We find the reasoning of this ruling to be over-broad and the application of it unduly restrictive. In point of fact, a pressure gauge would be completely useless if attached in such a manner that it could not be seen, which is the effect of the reasoning in our previous ruling. A pressure gauge that cannot be seen to indicate whether a system is operating under less than optimal conditions, or within a range of acceptable conditions, or to indicate potential danger if corrective steps are not duly taken, could hardly serve any function for which it would be intended.

After careful consideration of the cases discussed above we conclude that the U.S. original equipment manufacturers of commercial dishwashers, drilling equipment or refrigeration equipment and other products are the ultimate purchasers of the foreign pressure gauges.

Applying the factors enumerated in HQ 732057, supra, supports this conclusion. On the one hand, the pressure gauge is an important component which remains visible after assembly to the various pieces of equipment, and the process of assembling the gauges to the various pieces of equipment has not been alleged to be complex. However, the pressure gauge is only one of several important components, it is permanently attached to the remaining components, and it is functionally necessary to the operation of the finished article and not merely an accessory which retains its independent function. As we have stated, the pressure gauge must remain visible in order to have any utilitarian purpose. The facts are, however, that the pressure gauge, unlike the imported shoe uppers in the Uniroyal case which were the essence of the completed shoes, by itself is not the essence of the completed equipment, nor does it impart the ultimate shape, form and size to the completed product as the shoe upper did. Commercial dishwashers, drilling equipment and refrigeration equipment all will function without pressure gauges, and we note here that residential dishwashers and refrigeration equipment do not have pressure gauges. But just as an automobile will operate without a speedometer, it would surely be unsafe to operate commercial dishwashers, etc. without pressure gauges. Finally, while no cost figures are given and no discussion of the manufacturing process is presented with respect to the pressure gauges, we are comfortable in presuming that the cost and skill of manufacturing the pressure gauges is not significantly greater than the cost and skill required of manufacturing a complete commercial dishwasher, drilling equipment or refrigeration equipment.

We find that imported pressure gauges are substantially transformed by original equipment manufacturers of commercial dishwashers, drilling equipment and refrigeration equipment. The original equipment manufacturers are the ultimate purchasers of such pressure gauges when the gauges are combined with other components to become integral components of commercial dishwashers, drilling equipment and refrigeration equipment. Pressure gauges so imported and used are excepted from individual country of origin marking, and only their outermost containers need bear such marking. Statements to the foregoing effect must be filed with the district director of the port for each entry to be made pursuant to this ruling. Alternatively, the gauges themselves may be legibly and permanently marked in a conspicuous location.

In the case of pressure gauges not imported for use by original equipment manufacturers, but resold to or used by independent "jobbers" as replacement parts, the ultimate purchaser generally will be the owner of the commercial dishwasher, drilling equipment or refrigeration equipment. The owner of the commercial dishwasher, drilling equipment or refrigeration equipment generally will be the last person in the U.S. who will receive the pressure gauge in the form in which it is imported. See 19 CFR 134.1(d). Unless the district director is satisfied that in all reasonably foreseeable circumstances the ultimate purchaser will receive the replacement pressure gauges in their original unopened and properly marked containers, pressure gauges imported for such use must be legibly and permanently marked in a conspicuous location. We find that marking of the nut securing the pressure gauge to the threaded stem by either die casting, etching or cutting similar to the submitted samples, is acceptable.

HOLDING:

Imported pressure gauges which will be used by original equipment manufacturers in the manufacture of commercial dishwashers, drilling equipment or refrigeration equipment are excepted from individual country of origin marking pursuant to 19 CFR 134.35 and 19 CFR 134.32(d), provided that the containers in which they are imported are properly marked to indicate the county of origin of the articles, and Customs officials at the port of entry are convinced that the imported articles will reach the ultimate purchaser in their original unopened marked containers. Imported pressure gauges to be used as replacement parts generally must be marked with the country of origin in a conspicuous location, unless the district director is satisfied that all such gauges are imported and sold in properly marked containers which will reach the ultimate purchaser, generally the owner of the equipment. Statements to this effect must be submitted for each entry for which this exception applies.

HQ 727936, which required all pressure gauges to be marked on the face of the dial, is revoked.

Sincerely,

John Durant, Director

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